The new real-time bidding (RTB) exchanges seem to skew the buying power further in favor of buyers. They can see each impression in real-time, data-enhance it with their own data, and then bid on it. The problem is that most publishers don't know where the pockets of value exist in their remnant inventory, so they can't intelligently allocate that inventory in a way that makes them the most revenue.

Publishers need 3 things to maximize the value of their inventory on an exchange:

1. Inventory value. Publishers need to get back from their exchanges the value of their inventory, on an impression-by-impression basis. Just getting high-level average CPMs by section or zone isn't good enough, this masks the high-value impressions that may exist within those sections.

2. Third-party data. Your buyers are using data to understand the value of your inventory, you need to have the data to fight back. You should be setting floors on your inventory based these data segments, so buyers can't just cherry-pick your inventory at an overall low value, and you can't do this without the data.

3. An analytic system to maximize yield. You will need a system that can capture an analyze all this data - terabytes of it - and spit out a set of floor prices by inventory segment. In an ideal world, this system operates in real-time, re-setting floors based on the most recent data. I call this real-time selling - the antidote to real-time bidding.

Not all of these items are easily attainable. The first item is not generally available from exchanges, so publishers need to demand it. The second is becoming more available, from vendors such as Audience Science, BlueKai, and eXelate. The third will be provided by Yieldex, among others. Forward thinking publishers, who put this stack together, should be able to dramatically increase revenue from their unsold inventory.

16 Comments

Thanks for the post Tom. One question: what role does data that the publisher itself collects (who comes to the site, from where, and for how long) play into this? Does it factor into any of the three items you mention?

JR, typically buy-side platforms rely on their own data to make a bid on the exchange, so publisher side data isn't used in that case. Where the publisher data is valuable is when the pub does direct sales, and can use the data to differentiate their inventory and win RFPs.

Tom,
Why can't the publishers expose that data through the bid process and get higher bids as a result? Myspace does this really successfully with passing age and gender data through rtb at the moment.

My bet is that your system already knows age and gender for most of those people, and you're not going to pay a significant premium just because Myspace confirms it - but that's just speculation. I'd be interested to know what the lift really is.

I do think the low-hanging fruit for publisher data is to use it in direct sales. And the reason most publishers don't get good value for their data is they don't know how to take advantage of it properly - hence the value of systems like ours at Yieldex.

I assumed most of the exchanges charged on a fixed margin. Is this not true?

It makes sense that the low hanging fruit for publishers would be to use data to increase the value of their direct sales inventory. Beyond that, I can say as a 2nd channel buyer that I would love if there were more publisher-provided data available in the market. I would a willing buyer in a hypotehtical OPA cooperative data exchange that passed all profit back to the publishers themselves. Publishers could even reserve the data that provides the greatest lift for direct sales.

Let's be honest. First party publisher collected data is way more valuable, accurate and actionable than any third party data. However until publishers have the tools necessary to make this data actionable for markets they will continue to see the value of their audience and content sucked out of their domains and exploited by smart advertisers while they remain marginalized at the bottom of an even more fragmented revenue chain.

Great article Tom especially the third part about setting dynamic floors on multiple segments.

Yes first party publisher data is much more valuable. As a large publisher,it is important to get as much as data as possible out to the advertisers. The more people that have this data will drive up ad prices and keep smart advertisers from arbitraging your premium inventory. Plus you can still carve out this inventory for Direct Campaigns before it ever hits the exchanges.

but most publishers don't have the scale to make owning their own data worthwhile. Until someone comes up with a proper SSP to protect these valuable segments we will just have to suck it up and take what we can get (many people still pay a premium for this inventory).

I think there may be lower hanging fruit for publishers to go after to increase yields that trying to predict what buy-side platforms are going to be looking for on a cookie-by-cookie basis, definitely for the next 6-12 months! The number of companies who will actually be doing RTB at scale is going to be pretty small for a while especially in the current "pre-test" phase. I'd encourage doing some testing using your own data, opening up pieces of inventory to bidding on different platforms, getting to know the various systems and having dialog with the various players. Find out things like latency, fill rates, and how you can meaningfully differentiate your premium inventory from your remnant. There are plenty of great companies on the buy side (agencies, independent platforms and hybrids of the two) that are going to bring great advertisers to you and will always want high-quality inventory. Don't get caught out by the scare-mongering RTB hype nonsense-talk.

Rob, I agree most publishers have other lower-hanging fruit for optimizing yield, and we help them with some of those right now. The article was meant as more of a call for what the industry will need to make exchanges more palatable for publishers.

TB, yes, many of our customers use us in conjuction with an ad exchange and a network optimizer like Rubicon, AdMeld, or Pubmatic.

I don't get why sourcing third party data helps create a floor for publishers. If third party data is being by demand side to identify desired audience parameters, what does this have to do with the media valuation? When buying audiences (vs. buying inventory) we pay for the media based upon the value that piece of inventory presents - the data valuation is being sourced elsewhere and paid to the source.
Additional data provided by the publisher, either to confirm or augment the targeting, can be of value but why pay twice for data insight that is not sourced from the publisher?

Sourcing 3rd party data doesnt exactly create a floor for publishers. Publishers need to use data to set their own floors for each segment. What sourcing 3rd party data does create is demand in each segment. The more advertisers that are buying a premium audience, the higher people bid, the more the publisher makes. To make sure these 3rd party data segments are valuable, i also believe that pubs should work directly with Data Exchanges to ensure quality.

Floor prices should be set in part based on what the market will bear - look at eBay reserve prices. If there are lots of bidders for every impression, then the market will more likely reflect the "true" value, and floors become less important. But if there are only a few, then the seller should use the data to set a floor that helps prevent bidders from cherry-picking valuable impressions for cheap. I think it's too early to tell exactly how this will play out with exchanges, but we certainly have seen many instances where publishers sold valuable inventory to ad networks for rock-bottom prices because they didn't have the wherewithal to data-enhance it themselves and capture full value.